UK economy picks up speed

LONDON, England -- The UK economy picked up momentum in the second quarter of the year, led by a rebound in manufacturing, after nearly stalling in the previous six months.

Gross domestic product rose 0.9 percent from April to June, after expanding by just 0.1 percent in the last two quarters, the Office for National Statistics said on Friday. On an annual basis, the economy grew by 1.5 percent from 1.1 percent in the previous quarter.

In addition to increased industrial production, the office said service sector output also picked up sharply in the second quarter, rising by 0.6 percent from 0.2 percent in the January to March period.

"The rebound in GDP is broadly in line with our expectations, although the rebound in services at 0.6 percent isn't very convincing,'' Philip Shaw, chief economist at Investec Bank, told Reuters. "It's consistent with the economic recovery."

But the strong growth numbers are not expected to affect interest rates in Europe's second largest economy.

With current volatility in the stocks markets, and inflation at record lows, the Bank of England is likely to hold off changing it key lending out of fear of sidetracking the country's economic recovery.

Most analysts say the BoE's Monetary Policy Committee will keep the rate at 4 percent -- the lowest level in 38 years -- when it meets next week.

"I think the figures are sufficiently close to general expectations for the outlook regarding rates to be unaffected and that is for rates to remain at 4 percent for some time to come," Shaw said.

Added Commerzbank economist Peter Dixon: "The market uncertainty at the moment is dominating the interest rate agenda.''